What happened

Bed Bath & Beyond (NASDAQ:BBBY) shareholders endured a volatile trading week, with shares soaring nearly 30% at one point before settling to a roughly 10% increase as of early trading Friday morning. That smaller spike still blew away the 1.2% increase in the S&P 500, according to data provided by S&P Global Market Intelligence. It was driven by a new earnings report out from the specialty retailer.

So what

Bed Bath & Beyond announced on Wednesday that sales jumped in the fiscal first quarter as compared to the COVID-19-depressed period a year ago. Revenue has now increased at existing stores for four consecutive quarters, adding credence to the speciality retailer's rebound plan and to Wall Street's hopes for a strong recovery as the pandemic threat fades. Profitability is rising, too, due to sustained consumer interest in the home furnishings category.  

Two shoppers in an outdoor mall.

Image source: Getty Images.

Now what

CEO Mark Tritton and his team sounded an optimistic note about their potential to recapture lost market share and boost the efficiency of the business by closing underperforming stores. Yet investors should temper their enthusiasm. Bed Bath & Beyond still has several years of work ahead before it can claim to be on a sustainable growth path. In the meantime, the sales base is shrinking and profits are being pressured by a restructuring plan that includes an expensive pivot toward omni-channel retailing.

That shift has been valuable for peers like Target, but it's not yet clear that Bed Bath & Beyond has what it takes to follow in the footsteps of much its more established and better-capitalized retailing rivals. Thus, given the stock's head-turning rally over the past year, investors should brace for more price swings -- including potentially sharp declines -- in the months ahead. 

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium advisory service. We’re motley! Questioning an investing thesis -- even one of our own -- helps us all think critically about investing and make decisions that help us become smarter, happier, and richer.